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Day Trading for a Living?

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221–230 of 377 posts

Re: Day Trading for a Living?

#221
post #162

Earlier quoted context omitted.

> Its probably the hardest way to make money in the world Just no. Certainly it's not easy. But the hardest? I'd say there is a long list of occupations which most people would consider harder on various dimensions.

I think what parent commenter means is that it would be unlikely for almost anyone to make money that way, no matter how smart they are or how much time they put in. I think they aren’t saying that it’s a hard profession by itself in the way that you are talking about — only that the expected returns are negative for almost anyone. So in that case it’s not calling day traders smarter or harder working than others. It…

Really well put.

Re: Day Trading for a Living?

#222

While I agree that day trading anything is an extremely poor idea- why is trading by banks/hedge funds/Goldman Sachs etc. consistently profitable? (Or if isn't profitable, why do they do it?) Is it just the massive informational advantage that they have? I'm not advocating for trading per se (I certainly don't do it!)- just curious about how large financial institutions presumably turn trading profits in light of EMH

>why is trading by banks/hedge funds/Goldman Sachs etc. consistently profitable?

Not a level playing field. It's exactly because you're going up against guys like GS that's the reason for day trading being suicide.

Re: Day Trading for a Living?

#223
post #20

It is difficult to make a living but you can make money day trading. Market isn't the fastest. You can capture value on big events like the Boeing issues and other events. If you have risk appetite you can write options and pick up nickels in front of a steam roller.

With risk-defined option trading, you decide the size of the steam roller.

The pennies stay small though

Re: Day Trading for a Living?

#224
post #199
post #102

Earlier quoted context omitted.

Renaissance Technologies did not use algorithms to beat the market... they used tax schemes to do so: https://www.bloomberg.com/news/articles/2019-04-10/renaissan... When you factor in the money they saved from dodging taxes and how they managed to compound the growth on that money, their returns end up being no more impressive than any other hedge fund. Even if it turns out that what they did wasn't illegal, the bul…

You have absolutely no idea what you’re talking about. RenTec is the most profitable money making machine the world has ever seen (and likely will see). RenTec’s Medallion fund has an annualized return for over 30 years in excess of 35% net of fees. I’m not sure what their management fee is, but their performance fee is like 45%. This means they are making like 80% returns YoY before fees. I suspect you don’t work in…

I'm not in the industry, but I wonder: did people have the same kind of reverence for Madoff?

Re: Day Trading for a Living?

#225

I have a couple friends that do day trading on "technical analysis". As in, they only trade on the chart movements. Both claim to make money consistently. I generally believe them, but it seems like black magic to me. Especially when they explain what they're doing in detail. Not sure I understand this study tho, and whether or not it relates.

>I have a couple friends that do day trading on "technical analysis".

As someone that trades on fundamentals I like to think of that as reading tea leaves. Literally non sensical. Oh yeah sure that pattern is the upside down elephant so we should go short...

No smoke without fire though so I assume some are making money with it. Just doesn't seem like a sound idea to me.

Re: Day Trading for a Living?

#226
post #15

I mean you may as well say: Study shows it is impossible for an individual to build a tech start up as a living. Just because something is hard doesn't mean it's impossible. Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable.

Or you could say: it's impossible to win the world championship at anything. It would be easy to find data to show that 99.99% of people aren't the best tennis player or fastest runner or best Scrabble player in the world; therefore, nobody can be the best at it. According to this reasoning, at least.

That would be a perfectly accurate statement. If none except world champions got paid, it would be an atrocious career choice

Re: Day Trading for a Living?

#227
post #158

This is akin to saying "it is impossible to gamble at the casino for a living", which for the overwhelming majority of people is true. Having said that, it's not impossible. People have beaten casinos before, and they have beaten markets, by finding an edge over the house (or market) - but it's never the typical Joe type. In day-trading, the typical Joe uses so-called "technical analysis", the same stuff you'll find…

I think the "for a living" is really about beating it longer term and the income comes in a sustainable fashion. Even someone beating a casino I would think would get some big payouts to live on long term... but that casnio is gonna notice and shut down that "living" or just ban you. In that sense you're not doing it "for a living" as much as hoping to make enough money in a short span to maybe last longer term. Now…

Large, irregular payouts can also constitute a living. In extreme cases, it might even be just one payout.

Re: Day Trading for a Living?

#228
post #99

Aren't futures contracts, by definition, zero-sum? The average profit should be pretty damn close to zero (ignoring/averaging across trades with non-daytraders).

This is a common misconception. Futures contracts are very often used for nonspeculative purposes (e.g. Starbucks locking in prices for buying milk or farmers locking in prices to sell wheat). This is a form of insurance. While the end users are ultimately may net with each other, the intermediaries who take risk matching these parties charge a fee (the spread) for doing so. Why can't the end users trade with each ot…

I get that the insurance has a value of its own, but what about the trading of futures specifically?

Suppose I buy a biotech stock at $10/share. They make a breakthrough, and the stock shoots up to $110/share. I make +$100/share, but no one has lost the corresponding $100.

Suppose I agree to buy an ounce of silver from you for $20 in January. If silver is $21 then, you effectively lose a dollar , since you need to chip in a buck to get me my silver. If it's $19, you can slip a dollar into your own pocket before buying the silver on the spot market. Regardless of how it turns out, the total gain is zero.

What am I missing?

Re: Day Trading for a Living?

#229
post #158

Earlier quoted context omitted.

I think the "for a living" is really about beating it longer term and the income comes in a sustainable fashion. Even someone beating a casino I would think would get some big payouts to live on long term... but that casnio is gonna notice and shut down that "living" or just ban you. In that sense you're not doing it "for a living" as much as hoping to make enough money in a short span to maybe last longer term. Now…

Large, irregular payouts can also constitute a living. In extreme cases, it might even be just one payout.

I think the study shows that even that didn't happen for anyone in the market.

Re: Day Trading for a Living?

#230
post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

Also, the people I've known who call themselves day traders, were inevitably people who weren't too bright and were unemployed with independent income (mostly trust fund babies, but some others who had supplemental income) - From my own personal experience, these people don't even know what EBITDA adjusted earnings are. If a world class mathematician says he will do something, I see the probability of success wildly…

In my entire life, as far as I know I've only ever met one person who played the stock market manually and did well at it. It was almost a hobby for him. He enjoyed analysing individual businesses very carefully, and would look for clearly financially sensible opportunities that were effective at relatively small scales but overlooked by the big players.

A favourite type of investment that came up now and then would be a stock that had seen a sudden sharp drop in share price triggered by some announcement that sounded scary but actually made perfect sense if you understood the industry, so it panicked investors who were only looking at the numbers and left the price-to-book low or sometimes even below 1 at the time he bought. That's probably as close to a certain profit as you're ever likely to find trading stocks.

In any case, he almost always invested in "real" businesses and for the long term. He would set stops to protect himself, but he wasn't really a day-trader in the sense we're talking about here.

The last I heard, his average annual returns were something like 15-20% before taxes and fees, which is a pretty impressive record given he'd maintained it for many years and through both bull and bear markets. I doubt most people could do what he did -- the amount of patience and discipline he had were extraordinary -- but it was fascinating discussing it with him, and strangely satisfying to watch him do well by going with common sense and considered choices against a market that was temporarily confused about something.

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